Most of Adriana Perezchica’s home-buying clients aren’t getting the deals they used to.
On Monday, one of the sellers she was negotiating with pulled back their initial offer of a 3% discount on a $685,000 home in Washington state. Last week, another buyer had to compete against an all-cash investor and ended up paying $40,000 over the $440,000 asking price to close the deal.
“Housing activity really picked up in the last two weeks, and it’s likely because rates dipped for a few days,” Perezchica, the president of Via Real Estate Group, said. “We have all these pre-approvals lined up, we’re back to getting multiple offers, no concessions from sellers, and buyers back to bidding.”
The housing power dynamic has tipped slightly back to favor sellers after the banking turmoil led to a sudden dip in mortgage rates, bringing more buyers in from the sidelines.
For instance, the median asking price of newly listed homes is up 1% year over year, Redfin data for the four-week period ending March 19 found. Some 46% of homes under contract got an accepted offer within the first two weeks of hitting the market, the highest level since last June. And a quarter of homes sold above their final asking price, the highest share in more than three months.
The change means homebuyers who got used to being in the driver’s seat should act fast, some experts said, before a potential increase in competition crushes any room for negotiation in the weeks ahead.
“The dip in rates really motivated some buyers to return to the market and we began to see multiple offers again,” Perezchica told Yahoo Finance. “But it’s hard, there’s very little inventory available for affordable homes, and when competition picks up, sellers notice and aren’t willing to negotiate.”
Before the upheaval brought on by the Silicon Valley Bank and Signature Bank failures, sellers appeared to be ramping up concessions to sweeten the deal for price-sensitive buyers.
According to Redfin, nearly half of the homes sold in the three months ending February 28 included some kind of concession from a seller. Those incentives included mortgage rate-buy downs and cash to fund closing costs and repairs. Many of these incentives were aimed at offsetting rising mortgage rates, which added more than a half-point by the first week of March.
“Buyers are setting the market,” John Downs, senior vice president of Vellum Mortgage, had told Yahoo Finance earlier that month. “Buyers are starting to wait for listing prices to drop, they’re submitting offers with big discounts and making the seller make a decision and that seems to be working.”
However, recent rate volatility has switched up the power struggle.
Rates reversed course suddenly in mid-March on the heels of the bank collapses and the ensuing panic in the markets. This week, the rate on the 30-year mortgage hit 6.42%, down more than quarter-point in two weeks.
Buyers jumped back in. As of March 17, the volume of mortgage purchase applications had increased by 17% from a month ago after increasing for three straight weeks, the latest survey from the Mortgage Bankers Association found.
And sellers pulled back.
“The reason behind the mild pullback [in concessions] is that builders have seen better than anticipated sales in early 2023, due to mortgage rates retreating from the 20-year peak reached in the fall of 2022,” Rose Quint, assistant vice president of survey research for the National Association of Home Builders, told Yahoo Finance. “Continued use of incentives will depend on the trajectory of sales, which itself will be tied to interest rates.”
Negotiate a price reduction while you still can
The change in the housing market doesn’t mean homebuyers can’t get any deals, some experts said.
For instance, 31% of builders said they reduced home prices in March, according to the NAHB, while 58% provided some type of incentive.
“If you’re someone where cash isn’t a problem, that concession should be priced in. Just get a lower price,” Downs said. “If you’re someone that’s sort of scraping money to get a downpayment, then negotiate to have the seller pay your closing costs or ask for a temporary or permanent interest rate buy down.”
Buyers may even gain some wiggle room in the future. If inflation remains a problem and the Federal Reserve continues to hike its benchmark rate, that could prompt mortgage rates to rise again. In turn, sellers may be forced to offer incentives again to lure price-rattled buyers back to the market.
“If you’re a buyer, it’s a good idea to come in under the asking price,” Daryl Fairweather, chief economist at Redfin, told Yahoo Finance. “I would offer like 5% off your asking price rose in the market right now. Because many sellers are only going to get one other offer and your offer so they have to negotiate with you as a buyer. Maybe you can even get other things like cash on closing and decide on interest rate or other favorable terms. Definitely negotiate.”
Gabriella is a personal finance reporter at Yahoo Finance. Follow her on Twitter @__gabriellacruz.
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